Armenia: Huge ambitions in a devastated economy
Azerbaijan, Baku, March 4 / Trend /
Ellada Khankishiyeva, Trend Analytical Center Director.
Armenia's economy has been devastated. The global financial crisis has affected this small country with huge ambitions. Step by step, the crisis has paralyzed the banking and construction sectors. Large industrial facilities have been suspended and unemployment has increased due to the devaluation of the currency and food shortages. The situation is compounded by the negative balance of foreign trade turnover. Why has Armenia become the first major victim of the crisis in the former Soviet Union?
Armenia is virtually isolated from the world due to transport blockades and does not possess serious natural resources. The country's economy is based on huge amounts of investment by the Armenian diaspora. The crisis first diminished the financial possibilities of the diaspora and then gradually weakened the financial background of the diaspora in Europe and Russia.
Even the Armenian president's request to his compatriots not to stop funding has yielded no results. Wealthy Armenian businessmen in the U.S., Europe and Russia are more concerned with their own wallets.
Armenia's national reserves, which have been used to sustain the national currency, will exhaust shortly. To support small- and medium-sized business, the Armenian government is trying to attract finances from various resources to revive the state budget.
Yerevan appealed to the World Bank and International Monetary Fund (IMF) to provide financial assistance to overcome the effects of the crisis. Furthermore, Armenia requests a stabilization loan of $500 million from Russia. In accordance with a preliminary agreement, the credit is granted for 15 years with a four-year grace period.
Projections of international organizations also do not favor Armenia.
The IMF predicts the devaluation of the Armenian dram at 20-30 percent, and negative GDP growth in 2009 at -1.5 percent. Zero GDP growth in Armenia in 2009 was also predicted by the WB.
The Armenian government has also not sought to remedy the collapse of the currency as a measure to improve the country's competitiveness and create new jobs. It cannot delude the international community. The country's poor economy turned into a complete collapse for Armenia in terms of the crisis.
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